Nortel to Pay $35 Million for Accounting Fraud

Believe it or not, SEC shakedowns aren’t reserved exclusively for Dell. Telecom equipment provider Nortel, and its subsidiary Nortel Networks Limited are also feeling the heat — to the tune of today’s $35 million settlement with the SEC.

The scenario should sound familiar by now. Rather than adjust its unrealistic earnings estimates for 2000, 2002, or 2003, the fiercely competitive company relied on fuzzy math. This involved everything from claiming unsold inventory as revenue, to gross manipulation of its reserve funds amid executive bonuses.

"Nortel’s culture had long been extremely target-driven," an SEC spokesperson explained to the Associated Press. "It was understood across the company that either missing or exceeding a financial target reflected a failure to manage the company’s business properly."

Sound a little delusional? The SEC goes on to describe how deep-seated that mindset became: "In that environment, accounting did not serve to measure Nortel’s performance," said SEC officials. "Instead, Nortel’s executives and finance managers treated their books as tools to meet the company’s financial objectives."

With any luck, today’s settlement will bring Nortel’s financial troubles to an end. But one has to wonder — who seeds this irrevocable stance in terms of earnings? Is it the market, and its unrelenting demand for success, or the company’s management and its will to succeed at any cost? Either way, the end result for transgressors seems to be the same.